I have to disagree. I paid my house off in two years lived super poor and put every penny into paying off. I'd rather pay taxes once a year than rent for life.

Thank you for saving me from doing the would have been the worst financial decisions of my life, buying a house & financing a car. I owe you my life man!!

This happened with the 2004 housing boom - home prices were greatly inflated, meaning people couldn't sell later because they owed more on the house than they could sell for. I know quite a few people who bought then, thinking they were making a good investment to sell later, but it's taken until the COVID housing boom for the prices to come back to those original amounts.

I love this because it makes sense. I ran the numbers and was surprised that the house I want to buy is $15,000 cheaper to buy than to rent the equivalent. I messed with all the numbers and it still came out cheaper to buy. Thank you for this resource and explaining. It probably makes the most sense for people who don't have kids and like to live in town.

I have owned a 4-plax to rent out, a condo, a luxury condo, and an acreage. I have also built a log house. Gave up homeownership and started renting in 2014. Less headaches! :) I am a physician and with the healthcare crisis across the country, I can move if I don't enjoy my work anymore or if I have a better offer somewhere. I am in the process of moving for 2x salary increase. Not planning to buy a house anytime soon, but I save and invest my money, so when the market crash, I can buy if I know where I want to be in old age.

When you run the rent vs. buy numbers, make sure you take into account your entire lifetime. Don't stop at 5 or 10 years, include the numbers after the mortgage is paid off but the rent will still be due.

My mortgage is dramatically cheaper than any rental situation would be for me, and for the first time I have my own space - a whole flat & garden, not a room. Even once I add in my bills, it’s cheaper than renting was for me, and certainly cheaper than it would be now (London rent is scary). Once I could afford the deposit - which is obviously the biggest barrier for so many people, and that needs addressing - it was an absolute no brainer for me and I feel very fortunate.

Hello Remit. Thank you for all you do. My husband and I found you by watching your Netflix show. I was hooked, discovered your podcast, and rushed to buy your book. I purchased 2 copies. My husband and I had regrets about not purchasing a house. Everyone around us was buying and making us feel like we made a mistake. The numbers needed to make sense when we were looking for a house. You explained how you are not against home ownership. You are saying run the numbers! I'm happy and grateful that we found you because we invested the money we would put down on the house; we are pleased to say we are worth almost a million just by investing and keeping our bills low. We both are in the service industry and live our rich lives by renting a beautiful apartment. There is no way if we were to buy that house, it would be worth a million.

It all depends on the person's personality. If they can't save regularly and are always tempted to use up their savings, they should absolutely buy a house within their means. It's the only way to force yourself to build up some capital.

I have rented large houses for years and sublease a portion of it to my LLC; I use two rooms for my business and have the landlord install a separate meter for water and electricity. I am able to deduct my expenses from my taxes. My business pays for me to live there through my withdrawals and also pays for its own expenses. My LLC also carries the renter's insurance with an umbrella policy. I also rent houses overseas and use the same strategy. The houses I rent are now my assets because they make me money and cover the expenses. I sold both my houses 20 years ago after realizing the cost of owning was very high in Hawaii, about 60% higher than renting, and property tax is constantly increasing.

Thank you for sharing your knowledge. May the good Lord bless you more for your generosity. ❤

Very Informative

I bought my house about 10 years ago right out of college, the mortgage is way cheaper than most rentals in my area. Also it’s quadrupled in value since then. You have to be logical in what you can afford. Not every situation is the same and different cities aren’t as affordable but if I could do it over again I would always choose to own where I live homeownership.

In Canada what a lot of people don’t often factor in is yearly property taxes. So you have to think about that as well which could be anywhere from $3,000/$7500+ a yr depending on the size of your home and where you live.

Closing costs, maintenance, transaction costs, and renovations are not monthly costs. These usually happen once or every so often. It depends on the house. The rest are usually included within your mortage.

Completely dependent on where you live, property taxes and insurance. Dont buy a house in CA, unless you make $500k a year

Thing is a lot of these comments are saying they won’t have to work after they pay off the home. Property Taxes are gonna be the number one factor on if that’s true. Some people may have to pay 300-1000 or more a month in property taxes. Which for majority of people will require a job to pay for. And in 20-30 years it could be and most likely will be significantly higher.

Thank you for this amazing video 🙏🏼 After running the numbers, I realized that it didn’t make sense for me to buy a house, I’m better off renting and investing in the stock market rather than paying a high mortgage.

New sub!

All I know is that my sister rented, while I bought the house. Six years down the line, she recieved an eviction notice, and cannot afford the rent or mortgage of the house she lives in (because the prices have doubled in the last six years, and her rent was considerably lower than the average in the area). Now, she regrets renting more than ever. I'm not saying you shouldn't rent, I rent my office. But with a house, 8 times out of 10, straightout buying is the way better option. Never have to worry about eviction notices or the rent going up, or running into a douche landlord, who will not maintain the property, or prohibit you from making tiny modifications to your home, which you conveniently skipped over.

Hands down the best rent vs own video I've seen, was great

Great content

Yes! Run the numbers! For me it made more sense buying. Also, don't forget that property normally appreciates with inflation and the mortgage amount stays the same.

Without a doubt, this year will be worse than the last. I lost a lot of money last year as a result of bad investment choices that I would not have made if I hadn't been so worried about my portfolio. I kept investing, but I couldn't determine whether to start paying for a house. In the end, I sold my positions, and the house needed more work than I had planned. I'm not sure how long I can keep going like this

I don't think you understand that you will be at the mercy of landlords and rent increases. Have you seen the payoff of equity? I bought for 315k, with 3.5% down. and it's now 850k. Not even the stock market would have turned 15k into half a million in 5 years.

My landlord is providing a service. I am in a small town and pay less the $1K per month in rent. I put my money into R&D instead. While renting I accumulated 40 US patents. Each patent is approximately the value of a house locally. If I put my money into real estate, I would own one house instead. The main downside of renting is social perception: that is women like home owners more. The cost of ownership includes the cost of income taxes having a tie to the local community. In Canada the cost of ownership includes income taxes at 54%. By renting, I can sever the residency tie easily and move to a lower tax jurisdiction. I can save enough in income tax to buy a 8000 sq ft chalet in the Swiss alps free and clear in 4 years by moving to Switzerland. Not coincidentally, Switzerland has 16X more patents per capita than Canada because it is a better place for innovation.

I agree. I thought this way when I was 7 years old and my father was telling me about the 30-year mortgage (my parents own property before I was born). I thought it was ridiculous to pay 2-4 times more the value of your home by the end of 30 years of mortgage monthly payments. I believed in paying only for what you need to live decently. Throughout adulthood I would simply rent a room that fit my needs and pay less than 1/3rd my monthly salary on that, and this is in the NYC area living in Newark, NJ. Eventually I got a job where buying a house made sense after I saw I'd only be paying an additional $200 a month to swap a 1-room to a 2-bed+1-bath single family house with basement and backyard. House is old (circa 1920s) and required fixing up, but I saw a vision for it and it connected with me. 6 years later I paid it off completely. Now I only pay property taxes, which is next to nothing monthly (at the moment). I rent out my 2nd bedroom so that takes care of the monthly property taxes, utilities, and water bill. So essentially, I live in my house for free. So best to buy when it makes sense relative to what you make (stay at 1/3rd a month or lower in cost of your monthly salary) and keep an eye on those property taxes, because regardless of paying off the house you still rent the land so you never ever escape from renting. :)

People think I am poor because I am living in an apartment. I don't care what other people think about me. I save so much money because I am renting an apartment. I am responsible for my life, so I don't listen to those who are trying to persuade me to buy a house.

My 91 year old grandma wants to go rent an apartment. She can't keep up with the house and do the stairs. Renting with home care is cheaper than assisted living. Its opened my eyes to that as an option later in life, too.

I went a slightly different route. After my killer divorce wiped me out, and I got a good job, I began saving to buy property. [I was in my 50s, minimal investment, less savings.] I wanted to stay in the Boston area, but knew it was far too expensive. I ended up buying a historic duplex in a good neighborhood in an Upper Midwest city. Excellent location, nice interiors (which I could fix up), and I could afford to carry the rental if necessary. I like fixing old houses, so I fixed up the rental and keep doing so. [Added air conditioning to both units last spring.] Right now, the rental covers about half my mortgage payment. If the local economy goes up, due to location, I can probably cover my entire mortgage. And if not, it's no big hassle for me to cover it all. And yes, I ran the numbers every which way possible. In a previous career, I was an MBA level Financial Analyst - I run numbers for everything.

Something not taken into consideration is that rental prices generally increase year on year when mortgage is likely to decrease overtime.

Bottom line: do what works for you. Owning a home isn’t the be all end all. But if buying is a goal you’ve had and you can afford it, then by all means do so!

Let’s check if Ramit is correct and do the calculations on the property he identified in the video. The property in question is 776 Bryant St, Palo Alto, CA 94301. You can easily look it up and see all relevant publicly available information on any real estate aggregator site. The previous owner purchased the property on 10/26/2005 for $1,060k and sold it on 6/6/2018 for $2,150k. The question that we are going to ask here is whether that individual would have been better off renting this same property between these two dates and investing whatever money he saved in the stock market. I am going to make a number of assumptions and use the tools that Ramit suggested as much as possible. First off, let’s assume that on 10/26/2005 the previous owner made a 20% down payment ( $212k) plus closing costs around $10k excluding prepaid property tax (I’ll add that separately) and took out a mortgage of $848k. This would have been a jumbo loan, for which the median 30y fixed interest rate was 5.87% on that date. The payment for such a loan is $5,013.53 per month with the remaining balance at the time of sale of $623,314.31. Keep in mind that there was nearly a decade of time with countless opportunities to refinance this loan at 3.2%-3.5%, which would have drastically lowered the payment amount and the amount of interest paid. But, we are going to ignore that. The property tax is available from the public records. The annual amounts start at $13,227 in 2005 and go up to $15,886 in 2018. For simplicity sake, I will use an average of these numbers and divide by 12 to get a monthly amount of $1,213/month. The condo currently has HOA fees of $550/mo. The HOA takes care of all exterior maintenance/repairs including the roof and also provides homeowner’s insurance. I am going to assume that no supplemental insurance is required as is typically the case in that area. We have to adjust these fees for inflation to project what they were in 2005 and 2018. Using an inflation calculator, this amount is equivalent to $342.58 in 2005 going to $440.47 by 2018. Again, for simplicity, I’ll use an average of these numbers, which is $391.55/month. As far as maintenance expenses, since the HOA takes care of all of the exterior, we are going to allocate $50/month to a home warranty contract with $75 deductible and we will take a fairly reasonable $100/month to cover deductibles and any other maintenance issues. To keep things equivalent to a rental, I will assume no upgrade and remodeling expenses (you would not get that while renting). Here are the monthly expenses: Mortgage: $5,013.53, Prop Tax: $1,213, HOA fee: $391.55, maintenance: $150. Grand Total: $6768.08/month. Let’s now look at what it would cost to rent the place from 2005 to 2018. In 2018, the place was actually rented out at $5300/mo per MLS by the new owner. Since it was not a rental before that, I used US Census data for CA to project what the rent could’ve been in 2005. Their data shows a 56% increase between 10/2005 and 6/2018. Therefore, the rental price would have been $3,400/month in 2005 going up (assume linearly) to 5,300/month. Let’s assume a deposit of $10k for convenience (to cancel buying closing costs in the later calculation) Now, let’s assume that our owner decided to rent instead and put all the extra cash into S&P500 index fund. We are looking at the invested down payment of $212k plus monthly additions starting at $3,368.08/month linearly decreasing to $1,468.08/month over the course of 152 months. This requires some historical pricing data of S&P 500 and Excel. I can provide a link to google sheets if anyone is interested, but, at the time of sale (or move-out in this case) he would’ve had approximately 430 shares of S&P 500 worth $1.169M. That is certainly a large number, but the owner still ended up with a better deal: he pocketed $2.15 Mil - 7% commissions/closing costs - 623k mortgage balance = $1.376M. Keep in mind that I ignored many other factors favoring the owner, such as tax deductibility of mortgage interest and property taxes for the entire time of ownership, which would have been a huge benefit for the owner since it clearly exceeded the standard deduction. I also ignored the fact that the property could have been bought with no down payment or only 3% down, which would still let the owner get all of the appreciation with minimal opportunity cost. And, I deliberately excluded the fact that if the property was refinanced 3 years after the purchase at 3.5% per historical data, the total payment would have matched the rent at that time. Lastly, unlike gains from stocks, up to $500k in profits from the property is tax-free if used as primary residence. Buying was a clear win here. I am sure Ramit is a well-meaning guy and this post is not designed or intended to disparage him. But, if you take a certain position, do what you preach… run the numbers. Doing it on the past data to validate your premises on the example you chose is the least you can do.

I’m a PhD economist that works on the decision between buying and owning, and while many of the points made are correct, many other are biased at best. Principal (not principle) is not a cost; interest for many people can be deducted; the market for rental and ownership is not the same and is not always possible to find a rental that provides the same service as an owner-occupied; renting puts people at the landlords decision on rent and moving costs are high; owning vs renting needs to be balanced, it can’t always be better to rent or be better to own, at current mortgage rates, either house prices decline or rents need to continue to increase to rebalance the market. No doubt that owning is not always better, but an unbiased analysis would have been welcome, I know you can do it.

Interesting. I wonder will this work in other countries. Thanks for the insights.

It also depends on the market and the interest rate at the time. I bought in a soft condo market and when the interest rates were super low during the pandemic (2.875%). When doing step 1, even when factoring in repairs, maintenance and upgrades, I'm still coming out ahead by owning my place. Granted, I only put 10% down and will be paying PMI for another year (4.5 years into the mortgage), but the difference between the higher interest rate and the amount I'm spending on PMI leans in favor of me doing what I did. Also keep in mind that a lot of rentals do NOT include any utilities. My HOA fees includes water, sewage and trash. Plus when I own, I'm not at the mercy of a landlord, which could take weeks or even months to do some repairs or may not do them at all. As an owner, I schedule the people I need to do the work when it's convenient to me. But then again, I ran the numbers before I bought my place to make sure that happened, and I'm also paying extra on my mortgage so it will be paid off before I retire. That's one advantage of having a mortgage: the mortgage payments END. Since I am a remote worker and will be until I retire, I'm pretty much set in how I want to live my life going forward, and I'm doing the work to make this place a space where I want to live for the rest of my life, I'm committed to living here for the rest of my life or when I need to go to assisted living or a skilled nursing facility.

Ramit, I truly love your content but you have missed the emotional stress around renting: - inflation and no control over the annual increase in rent - horrible landlords and greedy leasing companies - little to no tenant rights Renting can be exhausting and unpredictable stressful. But from a financial standpoint, I completely agree with your points.

The problem is in the confusion with the term "buy." You don't "own" a home if you have a mortgage, people. The bank 🏦 does. 😳

Good analysis. By buying instead of renting, you will eventually own your house and stop paying, particularly if the price is correct. Personnaly, I'm 53 and finished paying my mortgage. Ok, it's only a tiny house but now I'm about to work halftime too.

I was fooled by housing prices always go up and renting is throwing money away So i bought a condo It was a sinkhole So glad I rent now

Find it strange renting is seen as throwing money away yet no one ever says bank interest is - especially the fact mortgages are weighted heavily towards interest at the start -nor other 'hidden costs'. Propaganda

Thank you for sharing your knowledge and experience Ramit! My wife and I almost bought a house because we keep having friends & coworkers around us buying and it honestly gets to our head sometimes. After running the numbers we decided to stay renting. After seeing your Netflix series it made me feel better about our decision. We’ve been able to save/invest 3000 a month for the last couple years. Our savings and retirement is bigger than it’s ever been and it’s kind of addictive to watch it grow. It motivates me to work harder to be able to invest more! Thank you for all you do!

I would prefer to own over renting any day. The only exception would be if I moved every few years. People complain about interest rates but in my opinion higher interest rates are a good thing. Housing prices will eventually equal out to the median pay. People could put more money down and finance a much smaller portion and pay it off as fast as possible. A lot of these people who own all these properties are having trouble renting the houses out to pay off their mortgage on the home. There have been more and more empty houses in my neighborhood. The house down the street is trying to sell for almost 900,000& but in reality the value should be less than half of that price. I watch them have open house every weekend and laugh. The people who bought it thought they would do a quick flip. They bought it and paint the walls and put in a few new appliances and raised the price by 30%+. The music stopped and they didn’t get a chair. One more thing is buy what you can afford.

I like how you start with the most unrealistic house you can find..

I would buy a house so when I'm 65 years old, i don't have to wake up at 5am to go to work with back and knee pain to pay my 700 p/w rent.

I own a duplex, live downstairs and collect rent from the unit above. Old house I renovated with my father. House probably gained over 100 000$ value over the last 4 years since I bought it. The rent covers all my mortgage and then some, all while charging below market rate (he's an old man who's been there 20 years, I intend to keep him as long as he's willing). I have two whole floors to myself, while paying less month to month than I would with a roommate. Got lucky, I'm well aware of that, but in any renting market, if landowners start losing money, that's gonna put pressure on price. You can't just assume nobody runs their numbers. Eventually, rent prices are going to catch up.

I agree, sometimes it makes sense to rent. Most of the time for most of the people it is financially better deal to own a home

Plus for the 28/36 rule instead of calculating the gross monthly income should it be net? Because the net amount is what you can actually pay from, correct?

I used that NYT buy vs rent calculator and...... I saved myself $3,225,000 over 40 years by buying my condo rather than renting. Yay! 😁 And, really, it is probably way more than that because I took advantage of prepayment options and cut my 30 year amortizatiom down and will have it paid off in 10 years, so I saved myself probably over $100k alone in interest. 😊

I never owned a home because i couldn't see myself having to deal with house things. So glad the landlord has to do all of that crap. I diligently invested sooo much money instead!

In my hometown in Ukraine average rent is 244 USD/month, one room apartment costs 38 700 USD. Due to the fact that NYT calculator can't calculate below 75K, i've just take my local currency to dollar 1:1, so my calculations are "Buying saves you 2,161,000 over 15 years". What means 52 707 USD. But due to the fact that currency sometimes devaluate fast - rent always increase with USD exchange rate so is buying. UPD: there is government program that give mortgage for 3% or 7% for 20 years, payments are in local currency.

Everywhere I've ever looked owning was cheaper than renting, and usually just on the shallowest of looks. When I was looking for a home a few years ago rents I was quoted were 50% higher than a mortgage would be. Sure there are extra costs to home ownership but my mortgage is also locked in, that number isn't changing. You can think of the upfront rent as being a number that won't change but that is only true for the terms of the lease. Everywhere I've ever lived rents always went up at the end of the lease. Hell I just looked for rentals in my area, and the cheapest place that is almost comparable is 75% more than my Mortgage.

I prefer renting, but I bought our house. Why? Because I don't like to have close neighbors. I am a light sleeper and sleeps early(9 or 10pm), so if I have neighbors close by like in a condo or apartment, most likely I won't be able to sleep due to the noise. Be nice to hear anyone's advice on renting vs buying if one of the need of my 'rich life' is peace and quiet after 9pm. :)

We need to make that a saying on the KZfaq finance section “Rent is the maximum you’ll pay, a Mortgage is the minimum you’ll pay” as a former homeowner it’s the absolute truth. Just because your rent is as much as a mortgage doesn’t mean you can afford the house and all its associated costs. Just watch the movie The Money Pit with Tom Hanks and you’ll understand…

What about after you pay off your mortgage?

What do you think about selling your house in retirement and using the dividends to pay for rent? Increase liquidity Increase portfolio balance Increase flexibility

The main reason I want to own my own property is to have more of a safety net, specifically when I finish paying the mortgage and then I don´t risk getting kicked out by a landlord when I´m 80.

i dont usually comment... but with a youtube name i will teach to you be rich and your opening line "im a multi-millionaire", i never clicked the back button so fast

Ok I see the benefits of investing the down payment and other costs., great

This is an important video; i already fell into the mortage trap; things you said are real.

I ran the numbers, we'd save $186k over 8 years by renting. I'm glad you're putting this info out there because I have never really heard this side of the coin and frankly it makes a lot more sense. My husband and I are nowhere near deciding where we're going to live for 15+ years straight, and personally, I moved around a bunch as a kid and I turned out fine. Grew up in an apartment. I don't feel like I missed out on much by not having a white picket fence.

Ramit seems anti-home ownership. There are a few things he doesn't mention that are applicable to most of America (that are not in large expensive metro areas). A mortgage fluctuates very little over time. It may go up a few dollars a year due to changes in taxes and insurance. However, rent prices are subject to go up every year. In 5 years the rent may be more than the mortgage and phantom cost combined and in 10 years it almost certainly will be. With every mortgage payment you are building equity in your home. If you have a $1500 a month house payment or a $1500 rent payment, with the house payment you will (most likely) get $200-300 of that 1500 back if you ever sell the house and the amount goes up every month. Just as there are "phantom expenses" in home ownership there is also phantom "wealth building". You can eventually pay off a mortgage and not have any house payment (or rent). Then you can take your house payment and invest, travel, or use it to live "your rich life" any way you want. Neither renting or Home Ownership is a magic bullet to building wealth. You need to be investing regularly in assets that tend to go up in value to build wealth, no matter where you live. I wish I had learned that in my 20's. You can rent for 30 years and not have any money or you can have a paid off house and not have any money. However, if you have a paid off house it is easier to "catch up" on investing because you have more disposable income due to a lack of house payment or rent payment. Ramit also doesn't mention the fact that home owners statistically have a much higher net worth than renters. This quote is from the Motley Fool article How Much Richer Are Homeowners Compared to Renters? dated Jan 16, 2024 by Christy Bieber "The reality, though, is that owning a home usually does make it a whole lot easier to build wealth. That's because: Each housing payment helps the homeowner acquire a valuable asset, which they eventually own free and clear. So each payment grows their net worth a bit, which is not the case when someone is paying rent. Homes often go up in value. A homeowner could add tens of thousands, or even millions of dollars, to their net worth as the home they are living in increases in value." and "If you decide not to buy a home, though, you'll need to make sure you are using plenty of your money to purchase other assets (such as stocks) that can help your wealth grow over time. You won't have the forced saving and property appreciation a homeowner gets, so if you want to be rich, you'll need to be much more intentional about finding another way to make it happen."

In your 1.9m house example I wonder why the cost to rent is only 5400, seems super low for a 1.9m house, which is also why the numbers massively favor renting for that example. In my area Charlotte, NC, it's practically always better to buy if you're going to be staying for 5 or more years. The rent is just way too high for it to be better to simply rent, given you'll be there for 5+ years. P.S. I learned a lot from this video. Great calculators in the description, too. Thanks man.

Great video , however renting in fl is around $1,700 to $2,100 . If you rent and make 5k a month you’re already close to 50% only on rent . Things are crazy right now lol

I wrote a check for my house . So there is no mortgage. Even with renovations it’s still under 150,000$. Oh maybe I should go and rent a million dollar house for 5,000$ a month instead of living in my free and clear house paying $2000 a year in taxes and insurance and invest $5000 a month.

We are retired. No mortgage. No rent. We set aside $550/month for taxes and insurance.

you probably forgot how fast the prices go up. Since year 2000, the price of home increased from $200k to 1 million in Agoura Hills area. Rents also go up by the same velocity. However, salaries have not increased by the same velocity. Please do complete analysis factoring in the inflation.

Basically, depends on interest rates

I 100% agree - and still caught myself falling for the myths embedded in my soul. We got a 370k mortgage and another 70k debt for renovation. We bought the house because "If we pay 1700 a month for the mortgage vs 1500 a month in rent ... that's a no brainer, right? This way ALL that money is equity for our retirement" Well... no. We 100% underestimated a) the hidden costs (oh hey, the boiler is actually getting a bit old and Putin decides to start a war, so gas becomes really expensive -> 20k for a new boiler; etc) b) the "life happens" side of things For a) we should have just done our homework of running the numbers a bit better... For b) ... You're not the same person you were 5 years ago. So chances are you're not gonna be the same person in 5 years from now! We thought the house made perfect sense, as we got a stable job in the area, planned to have kids, etc. - Then life came around and threw a few curveballs (both good and bad!) and now we're moving away for 3-6 years (to somewhere, where housing is provided for free). If we hadn't bought that house we'd pay 0€ in rent, basically giving us 2000€/month for investing... As it stands we're left with a house that we can't really rent out (German renting law... basically we'd have to do so much renovation it wouldn't be worth it) but also don't need for several years. TLDR: Don't underestimate the value of flexibility that renting grants you! A house really can "tie you down"!

If you want to talk about phantom costs of ownership that trip people up, please talk more about property taxes. Yes, everybody knows (or should know) that you have to pay property taxes. But did you know that when you see a "property tax" number on a real estate listing, that's NOT the amount that you'll have to pay? Rather, it's the amount that the current owner is paying - and what that means for how much YOU will pay depends on where you are. In many states, property taxes are stabilized for owner-occupants, so that regardless of how much the house value appreciates, property taxes only go up by a certain amount. In some states, that amount is zero - meaning that the owners are still paying taxes based on the assessed value when they moved in 10 or 20 years ago. If you put that number into your budget for property taxes, you're in for a very unpleasant surprise. And you MUST do your own research on this. As far as I can tell, there's no law - nor even any professional standard - that requires real estate agents or mortgage lenders to give you good information about property taxes. If you pay your property taxes through an escrow account on your mortgage, they can set your escrow payment to any old number that might have nothing to do with what your taxes are going to be. And you won't find out that anything is wrong until taxes come due and there's not enough money in the account - at which point your monthly payment will jump by many hundreds of dollars a month. You'll have no recourse against anybody when this happens. I know so many people (including me) who have gotten burned by this. But somehow, it seems like nobody talks about it, and I've never seen it mentioned in any first-time homebuyer information resources.

If you are young and want to rent than that's ok. For long term buying in better. Let's say the rent/mortgage is 3K a month. Ten years for now it will be cheaper to own even with phantom cost. Also, get affordable place to live.

8:00 11:22 cost 20:08

I think observing rental price trends is also valuable when making house purchase decisions. I’ve found that while my initial mortgage payment felt somewhat high, over time, it’s become cheaper and cheaper as rental costs go up

As a renter, how do you run the numbers as far as projecting annual rent increases?

It’s not just mortgage but you own the place. You can sell it anytime and get the lump sum. Why is that not considered?

That example he uses in that townhome is something I have seen...with such disparity in the rent versus buy payment. Addtionally he didnt mention the tax advantages of buying and what hasnt doubled in the last 10 years ...home prices and rental payments

Okay this talk about landlords only charging what the market will bear is just false. There was just a big story about how a company that owns lots of properties across the US was engaged in price fixing and forced prices up by purposefully keeping units empty.

I can vouch. I’m in this spot now. I ran many numbers. The maintenance cost is wayyy more than I anticipated. I realized that I have not only got a mortgage but I am now a property manager. And I have to always defend against renovation requests from the wifey. When renting, that was never an idea! I would have just stayed in my rental in would be way richer.

Hey Ramit, I highly appreciate your analysis and you are right about phantom costs of ownership. However, I don’t see consideration of future rent growth vs. fixed mortgage payments in your analysis. What are your thoughts there?

My home value went up $120k in the same time I paid $10k in interest, cost me $30k to buy it including downpayment but I did buy at 1.5% interest so I guess I’m lucky

I guess moral of the story is as follows: Figure out what your rich life is, weigh how much buying and renting matter to you, and then run the numbers taking into account everything. Only thing is renting isn't all sunshine and roses with rent prices going up everywhere, and all these property management companies ruining the experience for some as a whole. So whatever choice you make, run the numbers, and analyze all possible factors.

this is heavily country-dependent. In the UK these rules do not apply. Same for most of Europe.

Case #1. This case doesn't work where i live. My mortgage alone is less than if I were to rent my place by around 35%.

Also being able to spend 4000 every month you need income of around 150k just to get approved for the mortgage.

I feel like this video should include a modest Midwest small town example. Not everyone lives near a huge city with sky rocketing prices. My current mortgage/interest rate is just above $1100 for a single family home with four bedrooms. Please tell me where I can find a rent that low for a family of 5, needing 3 beds min. Also we have pets. Many rentals out here forbid pets. Even with phantom costs, we are able to keep up with all bills and invest. If we ever decide to move in this market, we are beyond screwed. Over $2000 for a rent or even buy again, it would be 40-50% of our income. Interest rates are brutal right now.

Happy renter here - I'm definitely going to start saying "I don't want to throw money away on interest"

These buying/renting conversations are lively! I feel insanely lucky to have been able to buy a house back in 2018. We couldn't afford it today because prices have almost doubled. Re: amortization tables. Interest scared me too, which is why we made an extra payment every month until we could refinance down to 2.5%. Again, insanely lucky. Buying isn't for everyone! I anticipate owning this home for another 40 years+, but I look forward to selling and renting in the future for all the conveniences you mentioned. No yardwork, less cleaning, having fewer belongings for our loved ones to sort through when we die, etc.

Hello -is there a Facet equivalent in Singapore or the UK pls?

For many, the emotional burden of renting (increasing rental costs, mean landlords, chance of having to move with short notice) seem to be worth the opportunity cost of not having money to invest. In the short term, for people who are in financially insecure circumstances, buying is the silver bullet to reducing the uncertainty around renting. But you’re only trading one insecurity for another and will more likely end up in debt or house poor considering the mortgage costs + property taxes + maintenance costs. If you really want to buy, buy a condo or buy something way under your means. For people who aren’t making millions (so for most ppl) this is the best option to ensure psychological safety and financial gain.

Owning a home is about the priceless intangibles: the stability of having a place to truly call your own, where you can put down roots and build lifelong memories. It’s about the freedom to customize your space and create the perfect sanctuary without needing permission. Homeownership means leaving a lasting legacy for your family, a tangible asset that can be passed down through generations. In a world of constant change, owning a home offers the unparalleled comfort of permanence. While it's tragic that homes have become overpriced for young couples in major urban areas in 2024, in a normal market, owning a home for at least 7 years remains the preferred choice for most. We're almost mortgage-free, enjoy watching the trees we planted years ago, have built long-term relationships with neighbors, and now have peace of mind in a home that has more than doubled in value since 2006. Even with the phantom costs, the value still increased significantly.

if your rent is half of your amortization, but that is very seldom in our country. the rent cost is almost the same as the amortization for new house. unless you rent a old house in 1980's, but still the owner will increase the rent based on the current market value. for me, it is better to own a house which you can tell it is yours, than renting with rules by the landlord and they can increase the rent anytime they want.

While a case might be made for renting versus buying, based on the assumption that people move after 8 years (on average), the other side of that coin would be that after 30 years of moving around but owning each house you have lived in, your equity stake is enormous. Anything past 30 years of ownership, if you own the home, your financial picture increases dramatically. If you buy your first house at 20, own for 30 years, and then you have no more mortgage, you can expect 15 years of cheap living (assuming you retire at 65), far below what renters would be paying. Real Estate traditionally goes up over time, as do the markets....but real estate likely would be less volatile than the markets.

I hope you know how many people you have helped with this information! My youngest son and his wife felt very discouraged about buying a home with the current market then I told them about you. He immediately got your book. They currently own their small co op apartment outright purchased with cash about 6 years ago. After reading your book, they realized they probably weren’t going to want to live in the same place for 10 years or more so they were able to rethink their plan, all the while saving & investing and buying a vehicle with cash. Since he works remote they are now visiting different states to see where they might want to rent a home. Your words about renting have really given people their power back, I believe, about what they really want to do. Meanwhile our oldest son who works remote is in Europe for 3 months, as a renter he has the freedom to do this!

I buy a house. I live in said house for a few years, make repairs, and make it nice and tidy. Then I buy another house and find a tenant for the old house. It has worked out well for me. I have low interest mortgages. I make a small profit. I like having control. I don't like living under someone else's roof and rules. I will add that I do invest too.

It has to be different from area to area. Where I live it is far more expensive to rent vs owning. Like 1100-1500 vs 2200-3800 differences. I hate owning. I miss apartment life, but owning is better for us. I do find it very hard to believe he is being honest when he states he has lived and rented the same house for 20 years. Unless it is a family owned home, I don't see someone living in the same home for 20 years and it being cheaper than owning. He could have paid it off in 15 and been rent free for 5+ years. How is that not cheaper? That calc he mentioned is not for all loans. It is very important to understand your interest schedule, which is different from loan to loan. But in general, if you won't live in your home for more than 5 years-just rent it. You won't break even if you buy and sell in less than 5 years.

Yeah sure. You have to consider all things. However, NYC and Palo Alto are two examples that are a bit ahm... fringe?

Renting is much more expensive than buying a public housing flat in Singapore. Rent can go up as well. Whereas mortgage will be the same amount throughout.

I'm originally from California and I moved to Missouri several years ago. What I found out was that rentals cost about the same but buying was way cheaper in Missouri. So for me it made more sense to buy a house.

Excellent video and information presented clearly, easy to understand format, thanks so much!

This was an amazing, insightful video. Thanks so much!